HNI Corporation (NYSE: HNI) today announced sales for the
third quarter ended October 2, 2021 of $586.7 million and net
income of $19.2 million. GAAP net income per diluted share was
$0.43, compared to $0.71 in the prior year. There was no variation
between GAAP and Non-GAAP net income per diluted share in the third
quarter of 2021 or 2020.
Third Quarter Highlights
- Strong growth in Residential Building Products: Third
quarter 2021 revenue grew 26 percent on a year-over-year basis, and
operating profit increased more than 10 percent versus third
quarter 2020 levels despite multiple sources of pressure.
- Continuing recovery in Workplace Furnishings: Third
quarter 2021 revenue was up approximately 11 percent from the third
quarter of 2020.
- Expanding capacity: In September, the Corporation
announced plans to expand production by opening a new seating
facility in Mexico. The facility, along with continued domestic
hiring, will provide capacity to help meet growing customer
demand.
- Residential Building Products acquisition: Earlier this
month, the Corporation completed the acquisition of Trinity Hearth
and Home, an installing distributor in North Texas. Trinity adds to
the Corporation’s leading installing distributor platform and will
allow the Corporation’s Residential Building Products segment to
better serve its customers in the rapidly growing Southwest
region.
“Our members stayed focused on serving customers in the third
quarter as the continued ripple effects of the pandemic created
near-term headwinds. While we drove strong order growth, the
ongoing difficulties tied to labor availability, supply chain
disruptions, and inflation in all categories of input costs
negatively impacted our results. Despite these pressures, we are
increasingly encouraged about 2022 given the actions we are taking,
the on-going recovery in Workplace Furnishings, and strength in our
Hearth business,” stated Jeff Lorenger, Chairman, President, and
Chief Executive Officer.
HNI Corporation – Financial
Performance
(Dollars in millions, except per
share data)
Three Months Ended
October 2, 2021
September 26, 2020
Change
GAAP
Net Sales
$586.7
$507.1
15.7
%
Gross Profit %
33.3
%
36.6
%
-330
bps
SG&A %
28.8
%
28.9
%
-10
bps
Operating Income
$26.2
$38.8
(32.3
%)
Operating Income %
4.5
%
7.6
%
-310
bps
Effective Tax Rate
21.5
%
17.6
%
Net Income %
3.3
%
6.1
%
-280
bps
EPS – diluted
$0.43
$0.71
(39.4
%)
Third Quarter Summary Comments
- Consolidated net sales increased 15.7 percent from the
prior-year quarter to $586.7 million. On an organic basis, sales
increased 13.8 percent year-over-year. The acquisition of Design
Public Group ("DPG") in the fourth quarter of 2020 increased
year-over-year sales by $8.9 million, and the acquisition of
residential building products distributors in 2021 increased
year-over-year sales by $0.9 million. A reconciliation of organic
sales, a non-GAAP measure, follows the financial statements in this
release.
- Gross profit margin decreased 330 basis points compared to the
prior-year quarter. This decrease was driven by unfavorable
price-cost and was partially offset by higher volume and improved
net productivity.
- Selling and administrative expenses as a percent of sales
decreased 10 basis points compared to the prior-year quarter. The
decrease was driven by improved leverage from higher volume,
partially offset by the return of costs related to temporary
actions taken in the prior-year quarter, higher investment spend,
and increased freight costs.
- Net income per diluted share was $0.43 compared to $0.71 in the
prior-year quarter. The majority of the $0.28 decrease was driven
by unfavorable price-cost along with the return of costs related to
temporary actions taken in the prior-year quarter and increased
investment spend, and was partially offset by increased
volume.
Third Quarter Orders
- Orders in the Workplace Furnishings segment increased more than
30 percent year-over-year, led by broad-based strength with both
small to mid-sized and contract customers. Workplace Furnishings
orders were also up greater than five percent versus third quarter
2019 pre-pandemic levels.
- Normalized orders in the Residential Building Products segment
increased 35 percent compared to the prior-year quarter, with the
year-over-year trend moderating somewhat as the quarter progressed.
Remodel-retrofit and new construction were both strong throughout
the quarter.
Workplace Furnishings –
Financial Performance
(Dollars in millions)
Three Months Ended
October 2, 2021
September 26, 2020
Change
GAAP
Net Sales
$393.1
$353.4
11.3
%
Operating Profit
$3.9
$16.8
(76.9
%)
Operating Profit %
1.0
%
4.8
%
-380
bps
- Workplace Furnishings net sales increased 11.3 percent from the
prior-year quarter to $393.1 million. On an organic basis, sales
increased 8.7 percent year-over-year. The acquisition of DPG in the
fourth quarter of 2020 increased sales by $8.9 million compared to
the prior-year quarter.
- Workplace Furnishings operating profit margin decreased 380
basis points year-over-year driven by unfavorable price-cost and
the return of costs related to temporary actions taken in the
prior-year quarter, partially offset by higher volume and improved
productivity.
Residential Building Products
– Financial Performance
(Dollars in millions)
Three Months Ended
October 2, 2021
September 26, 2020
Change
GAAP
Net Sales
$193.6
$153.7
26.0
%
Operating Profit
$33.4
$30.2
10.6
%
Operating Profit %
17.2
%
19.6
%
-240
bps
- Residential Building Products net sales increased 26.0 percent
from the prior-year quarter to $193.6 million. On an organic basis,
sales increased 25.4 percent year-over-year. The impact of building
products distributors acquired in 2021 increased sales $0.9 million
compared to the prior-year quarter.
- Residential Building Products operating profit margin decreased
240 basis points, primarily driven by unfavorable price-cost, lower
productivity, higher freight costs, and higher investment spend,
partially offset by increased volume and lower variable
compensation.
Fourth Quarter 2021 Outlook
- Solid consolidated growth: The Corporation expects
consolidated revenue, including the impact of acquisitions, to grow
in the mid-to-high single-digit percent range compared to the
prior-year quarter. This outlook includes the assumption of
continued impacts from labor availability and supply chain
constraints.
- Workplace Furnishings revenue: The Corporation expects
growth in the mid-single-digit percent range on a year-over-year
basis including acquisitions impacts. Order trends, an elevated
backlog, and continued momentum with office re-entry activity
support stronger growth but fourth quarter revenue will be
constrained by ongoing labor shortages and supply chain
issues.
- Residential Building Products revenue: Recent order
trends, quarter-ending backlog, new home construction activity, the
outlook for remodel/retrofit demand, and expected benefits tied to
multiple growth initiatives, combine to suggest growth rates in the
high single-digit percent range compared to the prior-year quarter,
including impacts from acquisitions and labor and supply chain
constraints.
- Profitability drivers: Many of the margin pressures
experienced in the third quarter of 2021 are expected to persist in
the fourth quarter of 2021. As a result, the Corporation expects
fourth quarter operating income to be at or slightly below that
reported in the third quarter.
Concluding Remarks
“We remain optimistic about our businesses and ability to drive
profit growth. We are aggressively addressing the current
headwinds. This includes increasing our capacity, strengthening our
supply chains, and taking aggressive pricing actions to offset the
ongoing and increasing inflationary pressures. Supported by our
strong balance sheet, we are also continuing to invest as reflected
by the addition of Trinity, which expands our strong Fireside
Hearth & Home installing distribution business into a rapidly
expanding housing region. These actions and investments position us
for success in 2022 and over the long-term,” Mr. Lorenger
concluded.
Conference Call
HNI Corporation will host a conference call on Monday, October
25, 2021 at 10:00 a.m. (Central) to discuss third quarter fiscal
year 2021 results. To participate, call 1-833-522-0258 – conference
ID number 3066955. A live webcast of the call will be available on
HNI Corporation’s website at
https://investors.hnicorp.com/events-and-presentations. A replay of
the webcast and call will be made available from Monday, October
25, 2021 at 1:00 p.m. (Central) through Monday, November, 1, 2021,
10:59 p.m. (Central). To replay the webcast, go to the link above.
To replay the call, dial 1-800-585-8367 or 416-621-4642 –
Conference ID: 3066955.
About HNI Corporation
HNI Corporation (NYSE: HNI) is a manufacturer of workplace
furnishings and residential building products, operating under two
segments. The Workplace Furnishings segment is a leading global
designer and provider of commercial furnishings, going to market
under multiple unique brands. The Residential Building Products
segment is the nation’s leading manufacturer and marketer of hearth
products, which include a full array of gas, electric, wood, and
pellet-burning fireplaces, inserts, stoves, facings, and
accessories. More information can be found on the Corporation’s
website at www.hnicorp.com.
Forward-Looking
Statements
This release contains "forward-looking" statements based on
current expectations regarding future plans, events, outlook,
objectives, financial performance, expectations for sales growth,
and earnings per diluted share (GAAP and non-GAAP), including
statements regarding the expected effects on our business,
financial condition and results of operations from the COVID-19
pandemic. Forward-looking statements can be identified by words
including “expect,” “believe,” “anticipate,” “estimate,” “may,”
“will,” “would,” “could,” “confident”, or other similar words,
phrases, or expressions. Forward-looking statements involve known
and unknown risks and uncertainties, which may cause the
Corporation’s actual future results and performance to differ
materially from expected results. These risks include but are not
limited to: the duration and scope of the COVID-19 pandemic, and
its effect on people and the economy; the levels of office
furniture needs and housing starts; overall demand for the
Corporation’s products; general economic and market conditions in
the United States and internationally; industry and competitive
conditions; the consolidation and concentration of the
Corporation’s customers; the Corporation’s reliance on its network
of independent dealers; change in trade policy; changes in raw
material, component, or commodity pricing; market acceptance and
demand for the Corporation’s new products; changing legal,
regulatory, environmental, and healthcare conditions; the risks
associated with international operations; the potential impact of
product defects; the various restrictions on the Corporation’s
financing activities; an inability to protect the Corporation’s
intellectual property; impacts of tax legislation; and force
majeure events outside the Corporation’s control. A description of
these risks and additional risks can be found in the Corporation’s
annual and quarterly reports filed with the Securities and Exchange
Commission on Forms 10-K and 10-Q. The Corporation assumes no
obligation to update, amend, or clarify forward-looking statements,
except as required by applicable law.
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Comprehensive Income
(In thousands, except per share
data)
(Unaudited)
Three Months Ended
Nine Months Ended
October 2, 2021
September 26, 2020
October 2, 2021
September 26, 2020
Net sales
$
586,750
$
507,063
$
1,581,498
$
1,393,224
Cost of sales
391,394
321,516
1,018,334
880,754
Gross profit
195,356
185,547
563,164
512,470
Selling and administrative expenses
169,113
146,785
489,634
449,933
Impairment charges
—
—
—
32,661
Operating income
26,243
38,762
73,530
29,876
Interest expense, net
1,853
1,517
5,465
5,271
Income before income taxes
24,390
37,245
68,065
24,605
Income taxes
5,232
6,558
16,476
5,259
Net income
19,158
30,687
51,589
19,346
Less: Net loss attributable to
non-controlling interest
0
(1
)
(3
)
(3
)
Net income attributable to HNI
Corporation
$
19,158
$
30,688
$
51,592
$
19,349
Average number of common shares
outstanding – basic
43,781
42,684
43,573
42,651
Net income attributable to HNI Corporation
per common share – basic
$
0.44
$
0.72
$
1.18
$
0.45
Average number of common shares
outstanding – diluted
44,342
43,010
44,045
42,905
Net income attributable to HNI Corporation
per common share – diluted
$
0.43
$
0.71
$
1.17
$
0.45
Foreign currency translation
adjustments
$
46
$
923
$
107
$
368
Change in unrealized gains (losses) on
marketable securities, net of tax
(32
)
(33
)
(157
)
269
Change in derivative financial
instruments, net of tax
170
106
577
(2,393
)
Other comprehensive income (loss), net of
tax
184
996
527
(1,756
)
Comprehensive income
19,342
31,683
52,116
17,590
Less: Comprehensive loss attributable to
non-controlling interest
0
(1
)
(3
)
(3
)
Comprehensive income attributable to HNI
Corporation
$
19,342
$
31,684
$
52,119
$
17,593
HNI Corporation and
Subsidiaries
Condensed Consolidated Balance
Sheets
(In thousands)
(Unaudited)
October 2, 2021
January 2, 2021
Assets
Current Assets:
Cash and cash equivalents
$
126,436
$
116,120
Short-term investments
1,299
1,687
Receivables
238,620
207,971
Allowance for doubtful accounts
(4,185
)
(5,514
)
Inventories
188,590
137,811
Prepaid expenses and other current
assets
44,702
37,660
Total Current Assets
595,462
495,735
Property, Plant, and Equipment:
Land and land improvements
29,983
29,691
Buildings
294,240
293,708
Machinery and equipment
588,126
578,643
Construction in progress
26,082
17,750
938,431
919,792
Less accumulated depreciation
576,423
553,835
Net Property, Plant, and Equipment
362,008
365,957
Right-of-use Finance Leases
9,940
6,095
Right-of-use Operating Leases
80,223
70,219
Goodwill and Other Intangible Assets
446,758
458,896
Other Assets
39,975
21,130
Total Assets
$
1,534,366
$
1,418,032
Liabilities and Equity
Current Liabilities:
Accounts payable and accrued expenses
$
464,599
$
413,638
Current maturities of long-term debt
3,345
841
Current maturities of other long-term
obligations
3,598
2,990
Current lease obligations - Finance
2,632
1,589
Current lease obligations - Operating
19,970
19,970
Total Current Liabilities
494,144
439,028
Long-Term Debt
174,587
174,524
Long-Term Lease Obligations - Finance
7,270
4,516
Long-Term Lease Obligations -
Operating
64,634
53,249
Other Long-Term Liabilities
91,270
81,264
Deferred Income Taxes
72,754
74,706
Total Liabilities
904,659
827,287
Equity:
HNI Corporation shareholders' equity
629,384
590,419
Non-controlling interest
323
326
Total Equity
629,707
590,745
Total Liabilities and Equity
$
1,534,366
$
1,418,032
HNI Corporation and
Subsidiaries
Condensed Consolidated
Statements of Cash Flows
(In thousands)
(Unaudited)
Nine Months Ended
October 2, 2021
September 26, 2020
Net Cash Flows From (To) Operating
Activities:
Net income
$
51,589
$
19,346
Non-cash items included in net income:
Depreciation and amortization
62,010
57,917
Other post-retirement and post-employment
benefits
996
1,104
Stock-based compensation
9,540
6,746
Reduction in carrying amount of
right-of-use assets
18,964
16,965
Deferred income taxes
(2,057
)
(3,730
)
Impairment of goodwill and intangible
assets
—
32,661
Other – net
2,640
815
Net increase (decrease) in cash from
operating assets and liabilities
(64,073
)
13,316
Increase (decrease) in other
liabilities
8,925
(1,779
)
Net cash flows from (to) operating
activities
88,534
143,361
Net Cash Flows From (To) Investing
Activities:
Capital expenditures
(38,182
)
(24,751
)
Proceeds from sale of property, plant, and
equipment
193
81
Acquisition spending, net of cash
acquired
(1,530
)
(10,857
)
Capitalized software
(9,613
)
(7,250
)
Purchase of investments
(3,273
)
(3,922
)
Sales or maturities of investments
3,164
3,246
Net cash flows from (to) investing
activities
(49,241
)
(43,453
)
Net Cash Flows From (To) Financing
Activities:
Payments of long-term debt
(1,810
)
(82,828
)
Proceeds from long-term debt
4,335
82,119
Dividends paid
(40,419
)
(39,060
)
Purchase of HNI Corporation common
stock
(18,461
)
(6,764
)
Proceeds from sales of HNI Corporation
common stock
29,944
2,210
Other – net
(2,566
)
1,727
Net cash flows from (to) financing
activities
(28,977
)
(42,596
)
Net increase in cash and cash
equivalents
10,316
57,312
Cash and cash equivalents at beginning of
period
116,120
52,073
Cash and cash equivalents at end of
period
$
126,436
$
109,385
HNI Corporation and
Subsidiaries
Reportable Segment
Data
(In thousands)
(Unaudited)
Three Months Ended
Nine Months Ended
October 2, 2021
September 26, 2020
October 2, 2021
September 26, 2020
Net Sales:
Workplace furnishings
$
393,141
$
353,361
$
1,040,026
$
999,827
Residential building products
193,609
153,702
541,472
393,397
Total
$
586,750
$
507,063
$
1,581,498
$
1,393,224
Income (Loss) Before Income Taxes:
Workplace furnishings
$
3,893
$
16,826
$
9,578
$
(8,619)
Residential building products
33,392
30,197
103,766
65,232
General corporate
(11,042)
(8,261)
(39,814)
(26,737)
Operating Income
26,243
38,762
73,530
29,876
Interest expense, net
1,853
1,517
5,465
5,271
Total
$
24,390
$
37,245
$
68,065
$
24,605
Depreciation and Amortization Expense:
Workplace furnishings
$
11,882
$
11,065
$
35,918
$
33,177
Residential building products
2,545
2,351
7,403
6,976
General corporate
6,443
5,896
18,689
17,764
Total
$
20,870
$
19,312
$
62,010
$
57,917
Capital Expenditures (including
capitalized software):
Workplace furnishings
$
6,494
$
6,946
$
24,001
$
18,340
Residential building products
5,456
2,695
12,113
5,874
General corporate
3,549
1,584
11,681
7,787
Total
$
15,499
$
11,225
$
47,795
$
32,001
As of, October 2, 2021
As of January 2, 2021
Identifiable Assets:
Workplace furnishings
$
832,055
$
762,780
Residential building products
415,092
381,550
General corporate
287,219
273,702
Total
$
1,534,366
$
1,418,032
Non-GAAP Financial
Measure
This earnings release includes certain non-GAAP financial
information as defined by Securities and Exchange Commission
Regulation G. Pursuant to the requirements of this regulation,
reconciliations of this non-GAAP financial information to HNI’s
financial statements as prepared in accordance with GAAP are
included below. This information gives investors additional
insights into HNI’s financial performance and operations. While
HNI’s management believes the non-GAAP financial measure is useful
in evaluating HNI’s operations, this information should be
considered supplemental and not in isolation or as a substitute
for, or superior to, financial information prepared and presented
in accordance with GAAP. In addition, this measure may be different
from non-GAAP financial measures used by other companies, limiting
its usefulness for comparison purposes.
To supplement condensed consolidated financial statements, which
are prepared and presented in accordance with GAAP, this earnings
release uses the following non-GAAP financial measure: organic
sales. This measure is adjusted from the comparable GAAP measure to
exclude the impacts of the selected items as summarized in the
table below.
The sales adjustments to arrive at the non-GAAP organic sales
information included in this earnings release exclude the impact of
acquiring DPG and residential building products distributors.
HNI Corporation
Reconciliation
(Dollars in millions)
Three Months Ended
October 2, 2021
September 26, 2020
Workplace Furnishings
Residential Building Products
Total
Workplace Furnishings
Residential Building Products
Total
Sales as reported (GAAP)
$
393.1
$
193.6
$586.7
$
353.4
$
153.7
$
507.1
% change from PY
11.3
%
26.0
%
15.7
%
Less: Acquisitions
8.9
0.9
9.8
—
—
—
Organic Sales (non-GAAP)
$
384.2
$
192.8
$
577.0
$
353.4
$
153.7
$
507.1
% change from PY
8.7
%
25.4
%
13.8
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211025005116/en/
Marshall H. Bridges, Senior Vice President and Chief Financial
Officer (563) 272-7400 Matthew S. McCall, Vice President, Investor
Relations and Corporate Development (563) 275-8898
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